Cracks In The REITs Sector!

Real Estate Investment Trusts (REITs) are a favourite for long term Aussie investors. REITs are popular for two main reasons:

- They enable a fractional ownership of some very large real estate assets that are otherwise beyond retail investors (shopping centres, CBD sky-scrapers etc.)
- They’re renowned for large and steady dividends

The last few years REITs have provided great returns to investors, some say it has been a ‘rising tide lifts all boats’ . However the last few months there have been large cracks within the REIT sector.

Good REITs are separating from the bad.

Here are the top 12 REITs, the worst four large-cap REITs and the charts that show how big the cracks already are:

Top 12 REITs that have beaten the sector (XPJ) over the last year, ranked by their performance in 2016 so far.

Rank

Code

Description

Last 3 Months' Return

Last 12 Months' Return

1

GJT

Galileo Japan Trust

30.43%

22.50%

2

AJA

Astro Jap Prop Group

22.13%

18.45%

3

LTN

Lantern Hotel Grp

17.65%

17.00%

4

ARF

Arena REIT.

11.24%

15.91%

5

CDP

Carindale Property

11.11%

9.34%

6

CQR

Charter Hall Retail

9.35%

6.14%

7

RFF

Rural Funds Group

8.93%

31.98%

8

BWP

BWP Trust

8.23%

13.45%

9

SCP

SCA Property Group

6.57%

10.57%

10

LEP

ALE Property Group

6.51%

6.85%

11

GMG

Goodman Group

6.06%

5.41%

12

DXS

Dexus Property Group

5.33%

4.18%

Bottom Blue-Chip REITs:

Rank

Code

Description

Last 3 Months' Return

Last 12 Months' Return

1

SGP

Stockland

2.44%

-7.14%

2

MGR

Mirvac Group

-4.55%

-5.56%

3

CHC

Charter Hall Group

2.20%

-9.70%

4

CMW

Cromwell Prop

-0.48%

-7.18%

Top 3 REITs against the Bottom 3 Blue-chips over the last year:

The previous opens up a lot questions?

• Why are the cracks beginning to show?
• Does this mean that the sector fraught with danger
• How do we distinguish a Good REIT from other REITs
• Are there sub-sectors that are particularly at risk for REITs and why?
• Are there any protections for these risks?

Christopher is head of equites at Spring Financial Group. Christopher has over 10 years' experience managing equities desks with thousands of retail clients and responsibility for maintaining and servicing retail and wholesale relationships.